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CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting

Management of Vindhya Steels Ltd. refuses to correct a material misstatement in the other information in the Annual Report, despite the auditor's communication. The auditor concludes that this refusal casts such doubt on the integrity of management and those charged with governance that the reliability of audit evidence in general is called into question. Which response is consistent with SA 720 (Revised)?

A disclaimer of opinion on the financial statements may be appropriate. SA 720 (Revised) recognises that in rare circumstances, refusal to correct a material misstatement in other information may cast such doubt on management's integrity that the reliability of audit evidence in general is called into question.

  1. AAdd an Emphasis of Matter paragraph and keep the opinion unmodified
  2. BA disclaimer of opinion on the financial statements may be appropriate in these rare circumstancesCorrect
  3. CRemove the other information from the Annual Report personally
  4. DIssue an adverse opinion on the financial statements solely because the other information is misstated

Explanation

SA 720 (Revised) states that in rare circumstances a disclaimer of opinion may be appropriate when refusal to correct a material misstatement of the other information casts such doubt on integrity as to call into question the reliability of audit evidence in general. An Emphasis of Matter cannot cure a loss of confidence in audit evidence. An adverse opinion applies to material misstatement of the financial statements, not of other information.

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